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Friday, July 14, 2017

Dying for a smoke in America

The American smoking rate has plummeted since the mid-20th century. Yet somehow the US remains a growth market. That is partly because the proportion of smokers has fallen, but the overall population is rising. With low taxeson cigarettes, intermittent regulationsand tobacco-friendly politicians, many US states still mirror conditions around the developing world where tobacco companies see potential.

America is “highly attractive” and the “world’s largest tobacco profit pool” outside of China, British American Tobacco’s chief executive, Nicandro Durante, said, as he described a $49bn deal to buy Reynolds American in January. The deal will make BAT the largest listed tobacco company in the world. The $49bn merger between BAT and Reynolds, expected within weeks, is the most recent act of faith by tobacco companies that selling cigarettes to Americans will remain profitable long into the future, even if the Americans who buy them can’t afford it.

Through the years, as the population rose, the proportion of Americans who smoke shrank, but their raw numbers stayed the same, at around 45 million smokers. Further, since the 1990s, the threat of tobacco litigation diminished and regulations proved less costly than feared, leaving tobacco companies room to increase the price of a pack. In America, where cigarettes are still relatively cheap, BAT only needs to sell two packs of cigarettes to make the same profit as it would selling six in other markets.

West Virginia arguably has the highest smoking rate in the nation. In places such as Logan County the smoking rate was 37% in 2015. The last time the national average matched that was 1974. The national adult smoking rate dropped from 42.4% in 1965 to 16.8% in 2014. . But in West Virginia, the smoking rate in 2014 was still 26%, according to the Robert Wood Johnson Foundation. One researcher with RWJF called the rate “extraordinarily high”. Drug overdoses killed41 peoplefor every 100,000 in West Virginia in 2015. The same year, lung and throat cancer killed tripled that number in south-western counties, such as Calhoun. There, those two diseases alone killed123 peoplefor every 100,000, according to the state’s health department. The same year, 46% of adults in Calhoun smoked, RWJF found. The West Virginia department of healthestimates that one in five deaths of people over 35 aredue to smoking.

Today, someone with a high school equivalency diploma is nine times more likelyto smoke (34.1%) than someone with a graduate degree (3.6%). A poll found Americans who earn between $6,000 and $11,999 are more than twiceas likely to smoke as someone who earns more than $90,000.

Eight out of 10 cigarettessold in the US will be pocketed by BAT and rival group, Philip Morris company. Not since Theodore Roosevelt’s presidency has tobacco been so consolidated. Mergers and acquisitions have allowed tobacco companies to squeeze profits from customers and the supply chain. Companies charge more for cigarettes, while union organizers say “poverty wages” keep families on the ropes.the Farm Labor Organizing Committee (Floc) secured a collective bargaining agreement with farmers in the North Carolina Growers Association. Several tobacco companies used farmers in the association, thus some tobacco workers were also covered. Last year alone, Floc handled around 500 total labor complaints, often for wage violations. But their influence is small: the union represents just 7% of North Carolina’s 100,000 workers. “I think they should pay more,” said Sintia Castillo, a labor organizer for Floc. “You’re rolling in money at the top, and we’re down here getting sick, going hungry.” “Child labor exists because of poverty wages. There’s no way that a family can live off of $7.25 per hour,” said Catherine Crowe, an organizer with Floc. Forcing children not to work without increasing wages, the union contends, would only leave struggling families worse off.

Last year, Altria and RJ Reynolds spent $71.3min California trying beat back a cigarette tax hike referendum. They failed there, but succeeded elsewhere. In North Dakota, tobacco companies spent more than $5 for every man, woman and child in the state, $4m altogether, and convinced voters to reject the tax. They also succeeded in Colorado, where they spent $7m.

States were awarded billions in damages from tobacco companies in recognition of the public health consequences. Yet they largely fail to spend the money they were awarded to prevent smoking. States collected $26.6bn from tobacco settlements in 2016, but spent only 1.8% on smoking prevention, according to the Campaign for Tobacco-Free Kids. Tobacco companies, by comparison, spend $9.1bn a year on marketing, or $1m an hour, according to an analysis of Federal Trade Commission data. North Carolina, America’s dominant tobacco-producing state, receives$139m annually from such tobacco settlements. Initially, the state set up three trust funds to spend that money: one to prevent smoking, one to help rural communities hit by a decline in smoking and one to help tobacco farmers.

The fund to prevent smoking was dismantled in 2011; all of that money was sucked into the state’s general fund. However, lawmakers allowed the settlement to continue to fund tobacco growing efforts. Between 2000 and 2004, another $41m of North Carolina’s tobacco settlement went to retrofit tobacco curing barns, a move that researchers called “arguably counter-productive to tobacco control”, and which some farmers believed was at the behest of tobacco manufacturers.